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Mr. Leela Sundar is a practicing tax professional with several years of experience in dealing with invidual and corporate taxation. He is a member of CA of India and is a government of India recognised Auditor. He participates in auditing of accounts of some big corporate houses in India. The propertyDirect.in is previleged to have him in the panel of experts.

Mr. Sundar will answer all your questions related to tax matters in general, and property taxes in particular. Members are requested to utilize this opportunity for their benefit.

ASK YOUR QUESTION

Dear Pothamsetty, thanks for this forum in advance. I have a question regarding service tax and VAT in Hyderabad , India. I bought an apartment in Hyderabad and builder is asking me for service tax and Vat. I did some research online and fouind some information but not sure the validity of the information. Should we even be paying service tax ? i found a circular released by commissionairate of service tax , New delhi in 2009 that all residential complexes ( even >12 units) are exempt from service tax....here is the link http://servicetaxdelhi.gov.in/readnews.asp?nid=155 Is it true that service tax is applicable on seme furnished apartment registration but not on furnished flats registration. R2I club forums , an online site , has some information on this http://www.r2iclubforums.com/forums/showthread.php/10374-Refund-on-Service-Tax-on-Apartment I am not sure weather to pay both service tax and VAT now , it costs me a lot to pay.. please advise.

Posted By : kumar Sep 3, 2010

I am salaried person with the net cash inflow of Rs. 53000 per month. My present monthly saving is around Rs.35000. I do not have any other liability and no additional cost of living at least for 5 years. I want to buy 1 BHK Flat between Andheri to Borivali. I do not have corpus fund to make the immediate payment for down payment normally range to 10-15% of cost of flat. I want to know if there is any builder who is offering handover of flat after 2 years (i.e I am looking for the flat with completion date around December 2011), till which i will make monthly payment of Rs. 35000. After that i will take the bank loan and repaid the full consideration. If above arrangement is possible, please give me the details. Also what should be the maximum cost of flat and eligible loan amount, i should opt considering my present income and saving.

Posted By : begnasi Jun 8, 2010

Hi, Am not dealing with property sale or buy thefore can not answer your question, however I suggest a project that might suit your requirement, this is all you need to negotiate with builders directly, most of them Okay it as there will be very nominal booking fees involved. Please talk to TATA Housing, they have project at Andheri, aimed at middle income group. You can get their details from tatahousing.in, Also visit other builders like evershinebuilders.com, you can negotiate a deal, however, most of the builders do ask you to apply for loan upfront so that Bank will guarantee the payment. Since there are many banks like Axis Bank offering Pre EMI repayment you can as well go for a loan right now, the only difference is that you will be making monthly payments to Bank rather than Builder, that way you are insured to some extent against builder delaying the project beyond promised schedule. Hope this helps you. Thank you.

Answer by : Leela Sundar Jun 9, 2010

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I am a foreign national of Indian ancestry (PIO, I believe). If I were to sell ancestral property I inherited from my parents (Resident Indians), what are my tax liabilities in India and in the US for the following considerations? 1) I sell the property for 50 lakhs and decide to invest it in RBI bonds 2) I sell the property for 50 lakhs, place 25 lakhs in RBI and 25 lakhs for repatriation back to the USes in India and in the US for the following considerations? 1) I sell the property for 50 lakhs and decide to invest it in RBI bonds 2) I sell the property for 50 lakhs, place 25 lakhs in RBI and 25 lakhs for repatriation back to the US

Posted By : Anna Jun 5, 2010

Hi, Please find the answer to your questions. 1) If you invest whole amount (50 lakhs) in the RBI notified bonds under India IT Act section 54EC, you are fully exempted from income tax provided you do not withdraw the same within lock-in period. You can submit the proof of tax exemptions to IRS in US after filing tax returns in India. The tax working sheet along with returns filed acknowledgement receipt should suffice the requirement for avoiding double taxation. Part 2. If you intend to take 25 lakhs back to US, you are liable to pay capital gains tax in India, which is 20% on the indexed value of the property. This you can show it to US Tax authority by showing the proof of tax pay receipt issued in India. For remaining 25 lakhs you need not pay capital gains tax as you intend to invest in bonds notified by RBI as tax exempt. Even though it is ancestral property you are liable to pay capital gains tax in India. The cost of acquisition is derived based on market value index, depending on when this property was acquired by your ancestors. Please enquire at local sub-registrar office where the property is located, they will be able to tell the difference between the market value index of old and current one, this will be used to calculate your tax liability. Thank you.

Answer by : Leela Sundar Jun 6, 2010

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I had purchased some shares on 1st May,2009. On 25th March,2010 I am planning to purchase a property for which I will have to sell those shares. Can I offset the short term profit on those shares by showing that as an investment in Real Estate?

Posted By : Ritesh Mar 16, 2010

Dear Mr.Ritesh, Unfortunately, the answer is No to your question. There is no provision in the Indian TAX rules to exempt TAX on the short term capital gains if invested in another asset. Therefore, if you sell your shares now and invest in real estate assets like a house or plot, though it is a long term investment you got pay short term capital gains tax at the rate of 10% on the profit of sale proceeds of your shares. Please let me know if you need further clarifications.

Answer by : Leela Sundar Mar 17, 2010

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hi this is nagesh how i post in propertydirect i asked my friend he we have to contact Auditor then i saw your profile giving good information so i posted my question please help me this thing.

Posted By : nagesh Mar 4, 2010

Dear Mr.Nagesh,My sincere apologies for the late reply to your question.Please note that for opening a cyber café you do not need to go for any registration from tax and audit point of view. However, you got to take necessary licenses from Police Department, and the local municipal authorities. Am not hundred percent sure about the fees charged by the police but the typical trade license fee for a shop would be around Rs. 2000 to 5000 depending on the scale and size of your business. Please contact your Ongole municipal office for details on this.Wish you all the best for new business.

Answer by : Leela Sundar Mar 15, 2010

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hi this is nagesh i am from ongole i want to know about cyber cafe i want to open new cyber cafe in ongole some body told we have to take license of cyber cafe ,we have to pay tax to government if we pay this month how many days license will be valid,how much we have to pay tax,where we can get license .please help me.very thanks to Mr. Leela Sundar&propertydirect members.

Posted By : nagesh Mar 4, 2010

DEAR SIR, PLEASE GUDIE ME HOW MUCH IS THE FEES DURING BUYING THE HOUSE IN GUJARATI INDIA.

Posted By : BHARAT Mar 2, 2010

Dear Mr.Bharat,From your question it is not clear whether you are looking for brokerage fees while buying a property in Gujarat or Registration charges. In Gujarat, property registration charges amount is 6% of the property value, Stamp duty is 4.9% and around 1% for Registration fees.’ Gujarat state is one of the Indian states which offers lowest registration charges, buying property in the state is going to benefit as Gujarat is the most prosperous and business friendly stat in the country, wish you all the best.

Answer by : Leela Sundar Mar 2, 2010

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please give me information for house tax balance of hanmakonda h.no.7-4-90,Machilibazar give full information for house tax balance thank you

Posted By : faseeuddin Feb 28, 2010

Dear Mr.Faseeuddin,Property tax is calculated based on the type property whether commercial or residential, with in that multi storeyed or independant house and current market value of property etc., In all major cities like Hyderabad,Chennai,Mumbai we can find the tax dues online using the website, I found that the Warangal Municipal Corporation does not provides such facility. You have only option to call the municipal authorities, property collection department. Unfortunately, we do not have any other source to figure out the property tax dues.

Answer by : Leela Sundar Mar 2, 2010

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Hi, Mr. Sundar, i am planning to invest in fixed deposits of rs. 25 lakh. Assume , the payable annual simple interest is 6.5%. (consider S.B.I. bank) after 2 years ,how much amount will be deducted toward tax from the maturity amount. how much recievable amount by me upon maturity after deductions. Awaiting your response in this regard. Thanks, PTV RAO.

Posted By : PTV RAO Feb 25, 2010

Dear Mr.RAO,TAX calculation on interest income earned on FIXED DEPOSIT scheme is quite straight forward, it attratcs the same % that your orginal tax bracket, say for example, if you are in 10% tax bracket i.e below 5 lacs income group,and your interest income on 25 lacs FD for 2 year term @ 6.5 % is 3.12 lacs, which will be added to your income under other sources, therefore you will have to pay tax at 20% instead of 10% as your income is exceeding 5 lacs. Essentially you fall into 8 lacs bracket so your tax obligation on 25 lacs FD for 2 years @ 6.5 will be 20% of 3.12 lacs(interest) i.e RS. 62,400,essentially you will get back 25 lacs+249600 at the end of 2 years. Hope this clarifies, please let me know if you need further help

Answer by : Leela Sundar Feb 27, 2010

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Mr Sundar, Thank you very much for the elaborate answer and extremely expedetious . I really appreciate it. I have been looking all over for a answer and was very fortunate to stumble on to this site. I do have a followup question if you do not mind. Since 54EC bonds are non repatriable (principle), will I have to pay taxes on it later if I want to repatriate the money after maturity of the 54EC bonds?Also is the 50 lakhs limit for the financial year? If my 6 month deadline for investing in 54EC bonds stretch across 2 financial years , will I be able to potentially invest 1 crore? Thank you very much

Posted By : ujwal Jan 27, 2010

Dear Ujwal, You are most welcome, The maximum limit for investment under section 54EC is Rs. 50 Lakhs, whether you invest onetime or two times it does not change. Therefore if you invest Rs. 50 lakhs this year, you can’t do it again next year, until the current lot attains maturity. Usually these bonds are not transeferrable, if you break the 3 year bond lock-in, you will become liable to pay capital gain tax to an extent that you had avoided by investing in these bonds. The tax liability arises in the same year that you happen to break the lock-in. If you hold them till maturity, you are only liable to pay tax on the interest income. Also, note that the interest accrued on these bonds is fully taxable, and tax is not dedudcted at source(TDS), however, you got show this as income generated by bonds while filing your IT returns. Hope this clarifies your question. Please do let us know if you need more info.

Answer by : Leela Sundar Jan 28, 2010

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I know that an NRI can invest in 54EC bonds. What I am confused is when I file my taxes in US, I have to declare the sale of property in india and will be taxed on capital gain in US. unless I can prove that I paid x amount as capital gains in India. Then I can claim this as foreign tax credit. If I invest in capital gain bonds in India will I get some kind of statement that says I saved x amount in capital gain taxes? Thanks UNS

Posted By : Ujwal Jan 26, 2010

Dear Mr. Ujwal, In India you would not get any specific statement that would detail the amount saved by reinvesting the capital gains in 54EC bonds. The only proof you get is the IT returns acknowledgement summary sheet, issued by IT Department in India and the supporting tax computation sheet which would contain the extent of capital gains reinvested in each category of bonds or annuities. This along with the bond certificate, which would normally state the section 54 EC under which the tax benefits are claimed. These documents might suffice as a proof of foreign tax credit while you file taxes with IRS in US. Say for example, you had sold a property of worth Rs. 20 Lakhs where you made long-term capital gain up to Rs . 5 Lakhs, thefore your long term capital gains tax liability is 20% of the gains, which is Rs. 1 Lakh. Then within next six months, you invested Rs. 4 lakhs in either Rural Electrification Corporation (REC) or National Highways Authority of India(NHAI) Bonds, the remaining Rs. 1 lakh capital gains to be shown as taxable under Capital gain head, therefore your liability becomes Rs.20 thousand instead of Rs. 1 Lakh. This kind of calculation would not be available in any form, other than your own income tax returns computation sheet, this computation is so specific to individuals that that IT department could not provide a separate proof of certificate for claims u/s 54EC.

Answer by : Leela Sundar Jan 27, 2010

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What are the tax implications if a person buys a house with a loan and sells it within the same yearor ,after three years

Posted By : laxmi Jan 2, 2010

Hi, The tax rate on long term capital gain on immovable property is 20% + Education Cess of 3% on Tax, as it come to 20.6% in total. If a house is sold with in 3 years the gain on sale become the short term capital gain and if it is after 3 years it becomes long term capital gain. It is irrelevent whether the house is on loan or not, The tax rate is 30% for short term and 20% for long term. Please let us know if you have any other specific issues to answer.

Answer by : Leela Sundar Jan 4, 2010

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Me and my husband, both are tax-payers with independent income sources, Can we get tax deduction benefits, with respect to the same home loan

Posted By : Shreya Jan 2, 2010

Yes, if your husband also earning separately, both of you can claim separate deductions in your income tax returns.The repayment of principal amount of the loan can be claimed as a deduction under section 80C up to a maximum amount of Rs.1 lakh individually by each co-owner.In cases where the house is owned by more than one person and is also self-occupied by each co-owner, each co-owner shall be entitled to the deduction individually on account of interest on borrowed money up to a maximum amount of Rs. 1.5 lakh. If the house is given on rent, there is no restriction on this amount.

Answer by : Leela Sundar Jan 4, 2010

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I sold a plot for 20% lesser price than taken price. So can you suggest can I show this loss in income tax. Can you send your respone to the given mail id

Posted By : mewe Dec 22, 2009

Dear Mr. Mewe, As requested I answered your question via email, please respond if you require any further clarifications

Answer by : Leela Sundar Dec 22, 2009

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